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Hospital Budgets React to Perfect Storm Created by Global Markets

Karen Minich-Pourshadi, for HealthLeaders Media, March 14, 2011

To Paul's point, at most hospitals or health systems, food represents a very small portion of the overall budget, so shifts in cost are seemingly inconsequential. However, from a global perspective, inflation in the cost of food can portend larger economic price shifts in areas such as energy. Shawn Fleming, portfolio executive for the healthcare supply contracting company Novation, has been tracking the global economy and its effect on raw materials for healthcare providers in a monthly report. 

The company began producing the report to help its clients track price fluctuations in areas such as cotton and steel in an attempt to aid providers in accurately forecasting their budgets and supply spending trends. This month, the report projects that market prices will increase 2.8% overall. A few other highlights got my attention as well, including:

  •  Rubber prices are up 63% over the last 12 months. Production output is expected to grow 5.3% in 2011 after growing 5.7% in 2010. The increases are expected to continue through 2011.
  •  On a steady climb since 2009, cotton prices skyrocketed in the last three months, increasing 37.6% over that time period and jumping a whopping 125% in just one year. Fleming says the price increases are due to sharp demand increases in China coupled with supply shortfalls caused by crop loss.
  • Global steel prices have risen 12.4% in the last three months and 25% in the last year. Though steel output has grown, there is also greater demand and the raw materials needed are also seeing a price increase.
  • Inflation in food is expected to continue for the first six months of the year, according to the U.S. Agriculture Department. Some of the increases are attributable to the increase in energy prices—getting the food to market is simply more expensive. Another influence behind the increase is the severe weather that nearly every country has been experiencing in the past few years that has left shortfalls in supply.
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